bbtmn

Taxing my Patience

Saturday 26th February 2011

If you’re lucky, you won’t have heard of UK Uncut. If you haven’t, they’re an activist group who basically want businesses to volunteer to pay more tax than they legally need to, and who also dislike banks (for reasons which aren’t entirely clear to me).

So. In the last week, the Royal Bank of Scotland have announced that they lose £1.13bn in 2010. They’ve also announced that in the same year, they’ve paid £950m in bonuses to their staff.

UK Uncut don’t like this. I can’t for the life of me work out why; they don’t like banks, and this one just lost over a billion pounds. They want businesses to pay lots of tax; this one just paid out £950m in bonuses. Bonuses on which there will be an associated tax bill. So RBS will end up paying more tax than if they didn’t pay their employees. Excellent!

Okay, if I’m being slightly less facetious, bonuses with a loss might not make sense if you only take a superficial look at the headline figures. They lost £150bn, then paid bonuses of £950m; what gives? Well, it’s a large company, made of lots of different components. Some of those made money. The people who made money for the bank are then entitled to their bonus. This is not a tricky concept.

UK Uncut protest by staging sit-ins in banks. This is really, mind-numbingly stupid. I used to work for RBS Retail, so I know that the RBS staff being inconvenienced by UK Uncut are not the greedy bankers that they want to target. They’re people who aren’t paid a great deal in the scheme of things, trying to do what can be a pretty stressful job. On a Saturday. They don’t need a bunch of ignorant halfwits coming in to make their lives more difficult, and it doesn’t actually achieve anything.

I don’t mean to stick up for RBS in particular, or banking in general. The things they did prior to 2008 were fucking stupid, and it’s an absolute failure that they are such crucial businesses that the state was unwilling to let them fail. The real – bloody scary – issue here, that people like UK Uncut fail to address, is that very little has been done so far to stop banks from abusing this position again. Governments are too scared to have tighter regulation, because they don’t want to drive banks away from the country and lose the massive tax revenue they bring. Focussing on pay or taxes is a mere distraction, to focus attention on really trivial things instead of the real systemic issues.

If they don’t like certain banks, fine. Don’t use them. If they want businesses to pay more tax, fine. Campaign outside HMRC to get the tax laws changed. But misconceived, ill thought-out, stupid protests like this are just a waste of time.

Posted at 4:57 pm | Posted In: PoliticsRant Tagged:

9 Comments:

Dickie

Saturday 26th February 2011, 5:01 pm

Also, if UKUncut want to take action against a big company that avoids its tax, they should really protest the Guardian too…

Ian

Saturday 26th February 2011, 5:25 pm

In mischief, a protest for The Guardian website was posted on the friday. I tweeted several Guardian journalists about it, ones who expressing an interest in covering the Uk uncut protests.

Funnily enough, this protest was deleted by UKuncut overnight. Not a big deal, I wasnt going to go anyway, but definitely interesting that action against their mate The Guardian was deleted without warning.

When challenged, UK uncut claimed that I must have deleted it myself, or the email wasnt valid. No and no. For an organisation (is it?) that claims to encourage individuals to rise up against tax avoiders, UK Uncut wasnt so keen to promote action against a paper who supports them, but avoids tax. Legally, but that didnt stop them hassling Barclays.

On a further note, the only reason I take any pleasure in mocking, criticising and defaming UK uncut is simply because a close friend works in a store that was targeted by them. While trying to close the shop door to avoid them getting in and disturbing the employees and customers, they caught her hand in a door, requiring medical attention. Accidental probably, but it hurt. By encouraging any idiot anywhere to target the shop workers who are not earning anywhere near the sort of amounts that UK Uncut make a song and dance about and by their love of ‘organic grassroots uprising’ and other clever sounding concepts they are also able to evade responsibility for their silly little actions.

Andy

Saturday 26th February 2011, 6:05 pm

People who go on about the Guardian’s tax situation read too much of Guido Fawkes. The Guardian appeared one year to pay an anomalously low amount of tax because they sold off their stake in AutoTrader, and reinvested the proceeds, for which there is an explicit exemption created by Gordon Brown a few years back. Most years the Guardian makes a loss, which isn’t taxed, I believe.

Ian

Saturday 26th February 2011, 6:14 pm

True. And I dont doubt that The Guardian did everything properly. But thats the case with most of UK Uncuts targets.

Dickie

Saturday 26th February 2011, 6:41 pm

The problem with Guido is that there’s a really poor signal to noise ratio in his posts. Some are questionable, but he makes the occasional excellent observation. This falls into the latter category.

“The Guardian appeared one year to pay an anomalously low amount of tax because they sold off their stake in AutoTrader, and reinvested the proceeds, for which there is an explicit exemption created by Gordon Brown a few years back”

Yes. Absolutely.

And to take advantage of that exemption, they had to wind up the Scott Trust (which, as we know was itself a tax dodge!) and set it up as a limited company so as to qualify for the Substantial Shareholdings Exemption on CGT. Because otherwise they would’ve had to pay the tax due on the profits.

So they avoided tax, whilst railing against those who avoid tax. It really doesn’t matter how Rusbridger tries to excuse this, because it’s still hypocrisy.

Lucy

Sunday 27th February 2011, 2:21 pm

Personally I agree with the principles of UKUncut (which won’t surprise you, I’m sure), but it was my impression that holding protests in public institutions such as RBS is an awareness campaign for the general public, with the eventual aim of public opinion influencing a change in the rules at HMRC.

Much more effective, I would have thought, than a small group of windswept banner bearers outside government offices, which if the ones in Durham are anything to go by are tucked out of the way in any case.

“If they don’t like certain banks, fine. Don’t use them.”

I keep thinking about switching my current account to the Co-op for ethical reasons. If there were protests in my local branch whenever I went in there about my particular bank’s tax dealings and investment policies (not the same thing, I know, but linked) it would speed my transfer up considerably. Bang, power of the consumer.

Dickie

Sunday 27th February 2011, 3:00 pm

UKUncut don’t like Barclays because they claim they apparently paid 1% tax. Employing the same sort of logic, Co-op’s tax rate was only 1.9%, apparently ;)

But yeah, if you want to switch (and the Co-Op bank are meant to be pretty good; certainly my limited dealings with them have been ok), you should. Btw that’s exactly why markets are desirable, so that people can exercise their choice depending on what’s important to them. Good, innit?

UKUncut as an awareness-raising campaign seems to me to be undermined if they succeed in pissing people off. Aren’t most customers of the banks etc just likely to be annoyed by the protesters? I know I would be.

And the aims honestly don’t make logical sense to me. Some of their examples of companies “avoiding” tax are when they have made profits abroad (in the case of Vodafone and Barclays), or for not paying tax when they make a loss (again, Barclays). In other words, they “avoided” tax because it’s not due! Using UKUncut’s logic, you or I should be targeted because we don’t pay the 50% income tax rate. Never mind that we’re not due to pay that tax because we don’t earn >£150kpa, we don’t pay it therefore we’re avoiding it! My example sounds stupid and it is, but it’s equivalent to what UKUncut say businesses should do.

Like I said in the post, worrying about bankers’ pay or tax avoidance is just a distraction away from the real issues. That’s really dangerous.

Lucy

Sunday 27th February 2011, 4:32 pm

In the case of Vodafone, Barclays and similar, if the only reason that they have moved that trading abroad is to avoid British tax regulations then that is tax avoidance. Pure and simple. No, it’s not illegal, but IMO it’s inherently immoral*.

And a bank not paying tax when it makes a loss is essentially cushioning that loss – it’s the old business of the government being too scared of the banks to let them fail. IMO (again, and I accept that it is an opinion, albeit quite a widely held one) if the banks were allowed to feel the full force of the repercussions of risky trading, it might cut them down to size a bit. If you or I make irresponsible financial decisions, we don’t get tax breaks to compensate for it so no, it isn’t the same logic.

I think you’re right that there are much bigger issues to be dealing with. The problem is is that change takes time, and the bigger the issue, the more time it takes. Also, you are more likely to get the person in the street fired up over a single, tangible concern than you are over the complicated ins and outs of such a massive economic issue.

“Btw that’s exactly why markets are desirable, so that people can exercise their choice depending on what’s important to them. Good, innit?”

As confirmed in t’pub, I don’t think that either of us would favour a hundred percent free market or a hundred percent regulatory system. It’s where you draw the line. Talking of in t’pub…

*corrected from ‘immortal’. Freudian slip much?!

Dickie

Sunday 27th February 2011, 5:43 pm

“if the only reason that they have moved that trading abroad is to avoid British tax regulations”

And it isn’t! For instance in Vodafone’s case, they had a subsidiary (based in Luxembourg) which sold phones in Germany to German people. Accordingly, that subsidiary paid the taxes due in Germany and Luxembourg (and some when the profits came back to the UK. £1bn in taxes, which is not to be sniffed at). For Barclays, see this blog for a breakdown of their tax situation, some of the errors picked out there are really phenomenal. UK Uncut do tend to pick really bad examples, and then spread disinformation.

As to the issue of tax avoidance being immoral, I completely disagree. Tax evasion, yes, that’s not on. I wouldn’t usually argue that something being legal means it’s moral, but in this case I think it holds. Government sets the tax laws, and I don’t think it’s unnatural for people and organisations to try to minimise their tax bills. If they do so legally, good. If the government doesn’t like the ways people reduce their tax bills, they are free to change the rules so as to close any loopholes.

(There’s also an interesting argument about whether it’s actually desirable for businesses to avoid tax to an extent. Because actually, corporate taxes are generally incident on customers and employees, not the owners of the business. Taxes are passed on to customers in the form of higher prices, and to employees in the form of lower pay (or fewer jobs in the first place). This is a bit tangential though, and I guess is really a justification for why taxes should be low in the first place.)

“And a bank not paying tax when it makes a loss is essentially cushioning that loss – it’s the old business of the government being too scared of the banks to let them fail”

Not quite. It’s a part of tax law which is there for any business, not just banks. Nowt to do with the government being scared of the bankers (although I don’t disagree that they probably are!).

“if the banks were allowed to feel the full force of the repercussions of risky trading, it might cut them down to size a bit.”

Yep, completely agree. But I don’t see why tax avoidance has anything at all to do with this. Rather, it’s the light-touch regulation that was prominent in the run-up to the crash. And yes, the government and the finance industry probably are too close, and the government probably is a bit scared of the finance industry running away (which to an extent is probably justified, but equally it does seem to be a bit of a paralysing influence).

I see what you’re saying about getting people fired up, but I do think it’s a distraction and not good. The idea is “Make bankers pay!”, but they only really go on about stopping bankers getting big bonuses (or other businesses avoiding tax, which is completely unrelated!). It seems to me more to do with jealousy, and a lack of understanding of what banks actually do. You’re right that change takes time, but focussing on these really trivial “issues” will delay the change that is needed. At the moment, government knows there is a desire for bankers to have lower bonuses. So they perhaps spend more time on that, less on implementing the systemic reforms necessary to reduce the likelihood of another crash happening (or the effects being as profound).

If it was “Make bankers pay for the implicit guarantee that should they get into trouble the state will inject billions of pounds into their business and stop them failing!”, or perhaps even “prevent banks getting too big so that they can be allowed to fail!” then it would be more accurate, if a little less catchy.

It’s no good getting people fired up about completely the wrong thing, even if the right thing is much less emotive.

Write a comment: